Goldman's Chief Economist Now Believes a Rate Cut is Unnecessary

Goldman Sachs chief economist Jan Hatzius said Tuesday he's pulling the plug on the idea that the U.S. Federal Reserve should cut interest rates.

Mr. Hatzius' is the second so-called U.S. bear within a week to change his tune regarding the direction U.S. interest rates should take, after Merrill Lynch's David Rosenberg also said a rate cut is unnecessary.

"Although the economy has slowed and inflation moderated in line with our forecasts over the past few quarters, we've been very surprised at the stability of the unemployment rate," Mr. Hatzius said in a research note. "Moreover, at least the industrial sector of the economy is now clearly reaccelerating, which is weakening the case for prospective labor market softening."

He raised his second quarter gross domestic product estimate from 2% to 3%.